Non-Profit Organizations – Think Business Model Before You Sink

About a year ago, the International Development Research Centre (IDRC) asked Universalia to help them explore alternative ways of thinking about resource mobilization for think tanks in developing countries. In recent years, resource mobilization has become a huge challenge for non-profit research institutions, as funding has decreased while competition for resources has increased. This is especially true for research institutions that are critical of government policy. In response to this challenge, the IDRC has invested in thinking about and testing different approaches to resource mobilization for research institutions, in addition to analyzing how these organizations can become more sustainable.

As we explored the existing approaches used by research institutions, it became apparent that most institutions relied on contributions, government grants and, at times, contract research. Each of these resource mobilization mechanisms has been successful in the past, but today, survival and sustainability require more thought and engagement. For example, in exploring the strategies of research institutions, we found that relatively little attention was paid to how they could monetize their products and services (e.g. their research outputs). In general, managers of research institutions have looked at fundraising or resource mobilization as a capacity that is separate from products and services. However, an alternative way to go would be to strategically look at these research outputs and ask who would/could benefit from them and how they could be translated into financial resources. Our study led us to the literature on “business models,” as private sector experience was perhaps the key to bridging the gap between resource mobilization and products and services. Little academic research exists on the subject of business models for non-profit organizations, and much of what has been published is conceptual in nature. We are only in the early stages of research on business models for the private sector, and research concerning the public sector – especially non-profit organizations – is still in its infancy.

Despite these limitations, we think that the use of a business model constitutes a quick way to assess the alignment between the underlying social value an organization wants to bring to society and the way it acquires funding. In many cases, products and services of research institutions are distributed free of charge to beneficiaries, who are different from donors. We see a need to reconcile these elements, namely the beneficiaries/users, sources of revenue, products and services, etc., and understand how they fit together in a business model.

Our quick assessment of the applicability of business models to non-profit research institutions led us to two conclusions. First, a business model appears to be a useful tool, and the concept can easily be applied to non-profit research organizations, albeit with some adaptations. Working on understanding the key components of business models allows a research institution to become more conscious of the costs of its activities, the outputs generated by its investments, and the value it can create for end-users or beneficiaries. Second, research institutions should remember that no business model is static: they need to constantly strive to renew themselves and avoid sitting on past successes, as changes in their environment and technology occur quickly. The strategic question, “what can threaten the future of our work?” should always be kept in mind during the development of any business model. This is also true for non-profit research institutions.

Non-profit research institutions should take the lead in looking for new and alternative business models that would make them less dependent on donor contributions to survive. As a result of this quick assessment, we are now fully convinced that thinking in private sector terms or developing a business model allows non-profit organizations to ask themselves the right questions and enhance their sustainability. Please read our report here to find out more.

For over 30 years, Dr. Charles Lusthaus was a Professor in the Department of Administration and Policy Studies in Education at McGill University. During that time, he taught Educational Management courses in organizational theory and behaviour, strategic management, organizational development, planning, and monitoring and evaluation to over a thousand graduate students.

Dr. Lusthaus is also a founding partner of the Universalia Management Group and is reputed for having pioneered an approach to institutional and organizational assessment (IOA). Today, the framework is used by a variety of international bodies including CIDA, IDRC, IDB, IUCN, and ILO. Dr. Lusthaus’ work on IOA is published in three books, one of which (Enhancing Organizational Performance) has been a bestseller for its publisher, the International Development Research Centre, for the past five years.

Mariane Arsenault is an evaluation consultant for the Universalia Management Group. She has managed programs and project evaluations for multilateral organizations such as the World Bank, UN agencies, the Caribbean Development Bank, as well as bilateral agencies. Mariane is also interested in organizational performance and assessment, particularly for non-profit organizations. She has recently worked on a number of assignments for foundations and NGOs that involved measuring organizational capacity and sustainability.